As is my practice, I set my buyers up with automatic drips from our MLS and give them a listingbook account to play with on their own.  No one ever stops there.  They go out onto all of those other websites and look their too.  Estately, Zillow, Redfin, Movato, ZipRealty, craigslist and who knows what else.  Generally it’s a retread of what’s on the MLS, but not always.  Here’s what that has yielded this week.

A home that is a short sale in Contra Costa County being listed by a firm in San Bernardino County.  I called them on Friday for showing instructions.  My business model is to put the clients in the home that fits their needs.  Period.  It’s Sunday morning, no return call.  There is no lockbox on the property, it’s occupied.

So to recap, this agent took the listing in spite of being 300 miles from the subject property and probably having never seen it.  They did not put it on the local MLS.   Did I mention it was a short sale?  How are they doing their clients any favors?  More importantly, they are making agents as a whole look bad.  They should have taken a referral fee and referred it out.

I just got a request from another client to look at a property that they found on one of those websites.  I couldn’t find it in our MLS so I searched the internet and there it was in the San Joaquin County MLS.  Some counties dovetail nicely, Contra Costa and San Joaquin don’t.  They only overlap out in the Delta where they actually meet.  Hundreds of buyers will never know about this house.  Here I sit on Sunday morning wondering how I am going to show it to my clients.

Dollars to donuts, the agent doesn’t respond to my email.

Sellers beware.  If your agent has a different area code than you do, ask if they belong to the MLS that your home should be listed in.  We have six area codes in my area.  I belong to the MLS that covers the lion’s share of the area.  I partner with another broker who belongs to the other two.  If I don’t belong to the MLS where the property should be listed, I co-list with him to assure maximum exposure.  We put the appropriate lockbox on the property for the area and we market it appropriately.  Maximum exposure equals maximum price.

If the seller is having to short sale, it is paramount that the agent is 100% engaged, that the property has maximum exposure and the agent the prove to the bank that they brought in maximum price.  I don’t know how that would occur if the agent failed to put the home on the proper MLS.

If you are thinking about buying or selling, I promise to give you sound advice and honest representation, even if that means I refer you to a colleague.  It’s my promise to you.

I didn’t.  And I won’t.  And I never will.

Why?  Because while my competition is sipping on their egg nog lattes and shopping at Nordstrom, I’m out doing what I always do.  I haven’t let up.  I always find a steal of a deal for one of my clients this time of year.  After all, it’s not going to close this year, more likely than not, but it will be in contract to close the beginning of next year.  While everyone is shaking out the cobwebs getting back into the swing of things for the new year, I’m handing over keys to new buyers.  New buyers that got screaming deals because they were out buying a house in December.

What I’ve found is clients that want to look right now are very serious about finding their next home.  Sellers who have homes on the market right now are very serious about selling their home.  A lot of the normal competition that muddies the waters are out at a holiday tree lighting ceremony, leaving me a clear field to play in.

If you need to shop for a house while everyone else is shopping at Neiman, call me.  I’m saving my egg nog latte for Christmas Eve.

Now his new home wasn’t the prettiest girl at the dance, trust me.  If they were playing Stairway to Heaven, this girl was going home alone if not for my buyers.  The last remodel took place…never.  It was original to 1959.  Yellow formica, matching worn linoleum and the carpet was perfectly threadbarren.

We have a shortage of inventory in my market right now.  I have two other well qualified buyers in his range who were in contract when I got him into contract on his new home.  They fell out back in August, in both cases due to wacky sellers, and NEITHER are back in contract yet.  It’s dicey out there.

I don’t know if the listing agent knew that.  I think my guy paid a fair price for the home.  I would have advised my sellers to take our offer.  If we faltered, someone would have snatched that house right up.

So I wrote FHA.

Stop laughing.

I have a great lender and I knew he could do it.  And he did, so I thought.  We made it through the inspections. The appraiser required carbon monoxide detectors, smoke detectors, the gas turned on so he knew the dishwasher worked and the “tripping hazards” corrected.  That made me laugh.  My house closed, although not FHA with huge gaping cracks in the garage, the driveway and the walkway.  How big?  Lizards live in there.  Swarms of termites nest in there.  Mice and rats escape through those cracks.  It’s a complete ecosystem in the cracks in my garage.  But I went out there with the buyer and we smoothed them over.  And we got loan approval.

Not so fast sweetheart.

It started as an innocent phone call.  My mortgage broker’s assistant called my buyer.  He needed to pay for the appraisal.  ”Can I use a credit card for that?” he asked.  ”Sure” she said.  He had the money in his checking account but didn’t want to read his debit card number over the phone in a busy office and have his checking account compromised if somebody wasn’t completely scrupulous.  Fair enough.  Then I order the inspections.  ”Can I use a credit card for that?” he asked.  ”Sure” I said.

I heard my mortgage broker tell me the ratios were tight.  My buyer owned another property in another state that was being rented out but wasn’t claimed properly on his taxes so he couldn’t offset the rent and there wasn’t time to amend his taxes.  He could make it but it wasn’t going to be tight on paper.

He signed off on time, we were right on time with everything.  And then they re-ran his credit.  He had used two different credit cards for the appraisal and the inspections.  The $20 a month for each of the cards threw the ratios off and they couldn’t fund.  Paying off the credit cards wasn’t going to solve the problem.  For reasons I cannot explain, I slept that night.  I think it’s because I trust my mortgage guy.

The next morning he calls.  He relocked the rate.  Simple enough.  The interest rate had gone down since the initial lock and now with the new lower interest rate his payment was lower and the ratios work.

At the end of the day, we closed three days late and my guy will be saving a little over $40 per month every month for the next 360 months.  Win.  Win.

I’m glad I work with a true professional for my mortgages.  He makes the difference sometimes.  I don’t know that another broker would have had to chops to figure that one out, or even try the solution.

The lesson I learned was when somebody says “the ratios are tight”, my answer is now, take your credit cards out of your wallet and unless you have a death in the family, leave them there.

I have five buyers right now all looking for something similar.  Each buyer has their own little ticklers which makes them a little different from the other, but the MLS search is the same.  I’ll look at each new property that goes out to them and think “Oh they won’t like this one but Bob and Sue will”.  And vice versa.  One wants it move in ready, one wants medium work, one wants it barely standing, one needs a big kitchen, one is sensitive to mold issues and one wants room in the back to play with the children.

There are 96 homes on the market right now that fit their criteria.  I’ve probably seen 70 of them.  The rest are on busy streets (no one wants that) or impossible to show.  You know the one, show W or F 3-4pm only, 24 hour notice required, call LA for appt. and they never call back.  I haven’t seen those, which gets me to my point.

If I can’t find your home and I can’t see your home, I can’t sell your home.  And trust me, your home isn’t special enough for me to jump through all of those hoops.

This morning I had an email from a client.  They saw something on Redfin, could I show it to them.  It wasn’t on the MLS.  I went onto Redfin and there it was, with an MLS number that was foreign to me.  I wondered where it was listed.  After noodling around for about 15 minutes I found it.  It was in the Santa Clara MLS.  The Santa Clara county line is 50 miles south of this property!  The property had been on the market for 75 days and I doubt anyone from our area has seen it.  What a disservice to that client!  Can you imagine what they are saying about real estate agents?  The market?  I can hear it now “The market is terrible, no one has come by to see our home!”  And the time is ticking on their short sale.  It’s darned near criminal.  Imagine what they’re saying about real estate agents.  ”My house has been on the market for almost three months and no one has come to see it and now they want to reduce the price!

Before you list your property BE SURE that the agent is going to list your property in the local MLS so the maximum amount of potential buyers can see your home.  How can anyone buy your home if they don’t know it’s for sale?

It is a full moon, but that doesn’t explain what’s going on.   I’m wondering if Bill Compton is secretly battling the werewolves somewhere on our behalf.  It’s been building for about three weeks. There are buyers out there but the inventory is stale. Really stale. There are a lot of homes that have been sitting on the market for a while for any one of a number of reasons.  Whenever a fresh nice looking home comes on, it’s such a rare occurrence that it disappears with about 10 days.

One of the mentors here at Keller Williams told me when I first started that there are three things matter when you sell a house.

1. Does it look good?
2. Does it smell good?
3. Is it priced good?

That’s it.  Right now much of what’s on the market does not pass that test on any level.  I was at one house yesterday that had such a smell about it that I still have that smell back in my sinuses.  The last thing you want is for a Realtor to remember that your house smells bad.

Right now there are a lot of properties out there that don’t look good.  I’ve seen sunset yellow appliances, dark oak cabinets from the 70′s and an avocado range.  Just in the last 10 days.  And not the same house.  Nor does it include the house with shag rug on the wall.  Or the one with the collapsed swimming pool.  Or the failed septic tank.  All this month, all different houses.

I’ve also seen two recently that I know for a fact have foundation problems.  Both of those homes were purchased by inexperienced flippers who think that they can do paint and carpet on a house with a crumbling foundation and throw it back out on the market for a profit.  Notsomuch.

This is how you sell a flip in this market.  This home came out beautifully.  New roof, new HVAC, new paint, flooring, kitchen, baths, new everything.  This house will not stay on the market.  It looks good, smells good and is priced good.  It’s going to fly out of here because it’s the best of the best in this market.  For every suspect situation in a house, buyer’s are ticking that off in their heads and DQing properties.

Currently buyers want to see a flip done properly or they want it priced properly so they can do the work themselves and benefit from the sweat equity.   Right now, I’m seeing a lot of neither.

I used to be a stock broker.  While I love the flashing numbers on the screen and the art of picking the right stock and building a beautiful portfolio for a client, I couldn’t sit at a desk for that long.  I love being outside.  I did learn what to watch for.  I managed against the dot.com bomb.  The market lost 80% and my clients on an average lost 2%.  That’s right.  I beat the market by 78%.  9/11 pretty much put a fork in my fledging stockbroker career.  It was fun while it lasted.

We’re seeing something very interesting right now.  Generally when stocks rise, yields on bonds go down and vice versa.  When bond yields are down, so are mortgages.  Not so right now.  Stocks are down and bonds are down too.  And mortgages are ridiculous.

Bankrate.com has the overnight low for a 30 year fixed at 4.19% last night.  That’s obscene.  If I believed in refinancing, I’d refinance.  They are giving money away right now.  It is far cheaper to buy than to rent in most of the Bay Area.

Yesterday a client of mine, who is a seller said “Yeah but nobody can qualify for a loan.”  Actually they can.  Lenders have relaxed the idiotic standards they put into place in 2008 and normal people can get a loan.  By “normal” I mean people like you and me.  People who have families.  People who work hard, take care of their families and save their money.  Normal people.  The only problems I’ve had with a client’s credit had to do with divorces that didn’t have formal separation agreements or weren’t finalized.  If your credit score is over 580, there’s a good chance you can buy a house.  If you’re on the fence, it’s a good time to get off.

If you’re thinking about buying or selling right now, click over to the contact page and give me a shout.  Even if I don’t work in your area, I have a massive referral network and will find you a qualified professional in your area to answer your questions.

This particular complex had what I referred to as the trifecta.  The owner occupied to tenant ratio was too low for financing.  The “delinquency rate” which refers to the percentage of units that are delinquent was over the FNMA cutoff and there was a construction defect  lawsuit.  That’s the trifecta!  No lender will lend on a complex with those issues.  Sometimes you can get past one or even two but all three are nearly impossible.

Why do those issues matter to a lender?  Let’s start with the owner occupancy rate.  When that rate gets too high, pride of ownership disappears.  Blight can follow, devaluing the lender’s position.  Lenders like a low tenant rate in the complex.   FNMA’s requirement is 51% at the time the loan is originated.

Next is the delinquency rate.  When a homeowner is losing their home, there is a good chance that they are not paying their Homeowner’s dues.  When a lot of homeowner’s are losing their homes, a lot of them aren’t paying the Homeowner’s dues.  When that rate gets to 15% they are outside FNMA guidelines.  At 15% the Homeowner’s Association is in danger of no longer being solvent.  If the HOA becomes insolvent, the condition of the community is compromised.  There are a few solutions for this issue.  In the most extreme circumstance I’ve even heard of buyers paying the dues on several units to bring the complex into compliance.

The most dangerous of the trifecta is the construction defect lawsuit.  This type of litigation has become a bit of a racket.  Essentially builders slap up new construction irrespective of proper construction standards.  The project is always insured.  When the new owners discover the slip shod construction, they sue the builder, who promptly refers the matter to their insurance company.  They’ve already taken their profit.  They don’t care.  And away everyone goes.  Generally the Board of Directors is not privy to this kind of racket and buys in.  Everybody lawyers up and the only ones that win are the builders who are protected by layers and layers of Limited Liability Companies and the lawyers.  The homeowners and the Homeowner’s Association always lose.  Lenders won’t touch this situation and I can’t blame them.

Some of the unknowns include the attorney’s fees, the amount necessary to actually remedy the situation and the Association’s will to fight the fight.  If the Board takes a position of injustice it could get very ugly.  If the Board takes the position of mitigating loss to the association, there could still be tremendous soft costs if the builder’s insurance company wants to scrap.

Construction defect lawsuits are a great unknown.  So when a gentleman calls me and tells me that some other real estate agent said that construction defect lawsuits are no issue to the buyers, I nearly lost my mind.  Firstly, the buyer assumes all the liability from the case when they purchase a unit in an affected complex.  Secondly, unless the association’s attorneys totally obliterate the builder’s insurance company, there will never be enough funds to cover the corrections and the attorney’s costs.  Few associations have the reserves to pay for either.  That means that either the association will do a special assessment to each unit to cover the costs or finance the costs with a deed of trust on the common area and add the debt service to each unit’s monthly dues.  Either way, the buyer is financially impacted by the lawsuit.  Lenders won’t lend because they fear that a buyer will walk away from a large assessment.

The complex my listing was in had units selling for $30-40k under what they should have been selling for because it was impossible to finance the units.  That’s what happens to complexes that get into that much trouble, they end up being grossly undervalued because of the unknown of the health of the association.  There are deals to be found out in those complexes but be informed, with risk comes reward.  Do your due diligence to mitigate your own risk, then reap the rewards!

Now I’m as cantankerous as the next person, that’s for sure, and I don’t like the government telling me what to do.  I’m always incredulous about any law that requires me to go buy something.   This new law is different.  It’s kind of like seat belts for your house.  Seat belts save lives.  So do carbon monoxide detectors.

Every year roughly 500 people are killed and another 20,000 are injured due to accidental poisonings that could have been prevented by a carbon monoxide detector.   It’s unknown how many thousands are affected by a carbon monoxide leak and don’t know it.  In my case it hits a little closer as my mother lost a friend who’s life could have been saved by a carbon monoxide detector.  The truth of the matter is that most of us will never need one, but none of us know who the one person we know is who will need one.  Is it worth $30 to have that person in your life?  There’s your answer.

The law requires any “Dwelling unit intended for human occupancy” to be equipped with a carbon monoxide detector.  They define a “Dwelling unit intended for human occupancy” as follows:

“Dwelling unit intended for human occupancy” means a
single-family dwelling, factory-built home as defined in Section
19971, duplex, lodging house, dormitory, hotel, motel, condominium,
stock cooperative, time-share project, or dwelling unit in a
multiple-unit dwelling unit building or buildings. “Dwelling unit
intended for human occupancy” does not mean a property owned or
leased by the state, the Regents of the University of California, or
a local governmental agency.

They missed the mark with the exemptions.  Should dorms be exempt?  No.  There should be no exemption from this law.  It’s a good one and it will save lives.

Home Depot has published a handy guide to buying these devices on their website.  Check it out and go to your local hardware store and get one.  The last thing you want to do is put it off until the day after you need one.

www.youtube.com/watch?v=_VrFV5r8cs0

There’s a whole television network devoted to doing it yourself, and several others with multiple shows teaching us how to build our own or fix our own homes.  I have personally remodeled two homes.  I know when to hold and when to fold.  In my kitchen of my last home I did the tear out.  I painted.  I installed lighting.  I did not lay tile or hang cupboards.  I did not install the appliances (although I did in the next job).  I’ve got some skills.

But I know my limitations.  In this picture I did the paint and the moulding.  The hand thrown Brazilian floor tiles were professionally installed as were the cabinets and countertops.  I can tell you that in future jobs I installed the appliances, but I did not do it in this remodel. 

When it comes to doing your due diligence, don’t leave it to your buddy Sal, hire a professional. 

I recently had one of my listings in contract and the buyer instead of hiring a professional to do their inspections had their buddy come by and look at it.  At the end of the day, they didn’t get a report from him, nor was he, after a curory check of the  Contractor’s Licensing Board, the “contractor” that he professed to be.   He said (or so I’m told, he also didn’t speak English) that the roof and the foundation were bad.  Yet he was unable to provide a written report as to what the issue might be with either.  Mystical water intrusion in a house with a 6 year old roof and an imaginary “deep crack” in the foundation.  No photographs, no written report, nothing.  And the buyer’s bailed out.

This was not a professional inspection and investigation, this was some guy just trying to make a buck.  Now the buyer is squimish about the home and possibly for absolutely no good reason.  It might have just been a scam all along.  How sad for those buyers.

Hire professionals.  It’s fine to cut some corners, but know your limitations and don’t let opportunity slip away because some less than scrupuolous clownfish wants to make a buck for himself.

What?  I’ve spent the last several weeks arguing debating with buyers what an acceptable purchase offer would be.  I’ve laid out the facts in every way I can imagine, but because it’s not on the internet no one believes me.  So I’m putting it out on the internet so buyers can find it and feel good about listening to me.

Real estate is having a sale.  It’s your Nordstrom annual sale.  You are going to want to get up at 7am and come on down here in your bunny slippers.  This is it.  Prices are down, money (interest) is cheap and it’s not going to last.  The only difference is that Nordstrom can tell you the exact day their sale ends and I don’t know the exact day this will be over with, but I promise you it won’t last.

Housing Affordability

If a picture is worth 1000 words, here is your 100o words.

Now, in 2008 Housing Affordability was at 137.8 a 20 year high.  January of 2011 it was 191.0.  It went UP from the last number on this chart.  Unthinkable numbers.  This will not last.  That’s the thing about business and charts, it’s cyclical.  An all time high is always followed by a drop.  Now is not the time to be tripping over a dollar to pick up a nickel.  Lowballing in this market will only get your shut out.  Some properties are now getting multiple offers.  Do your homework and bid within the comps.  If the comps show the property to be underpriced, bid within the comps.  Especially on short sales.  Banks aren’t stupid.  They aren’t going to take a low ball offer.  They would rather foreclose if nothing else is forthcoming. Repeat.  Banks aren’t stupid.  They have charts and matrixes and layers of management to be sure that they get as much as possible on a short sale.  If the short sale offers aren’t fair and reasonable, the bank will foreclose.  Why?  Because the insurance on the loan will make them whole.  They don’t need to sell short.  Bid within the comps.  If it’s a multiple offer scenario, leave the appraisal contingency in place as a stop gap.  If the appraisal comes in low, negotiate the price back down.

A thermometer I always recommend is put yourself in the sellers shoes.  If you received that offer, what would your response be?  Now, what number would be just enough to entice you to get off of your couch and answer the phone?  Bid that number.

Now is the time to pull up your big boy pants and call your lender, your agent and your landlord.  It is not going to get any better than this.  If you sit paralyzed on the fence because of something said on the 6 o’clock news or something your read over at some supposed “consumer” website advising you not to buy real estate the train will have left the station and you will still be on the platform.

If you’re looking for an agent call me and if I don’t work the area, I will get you a referral to a qualified agent in your area.  Now is the time.

You can reach me at 925-381-2998